What Type Of Technology For Least Developed and Developing Countries

Francis Mangeni

It is a common argument that most of the technology that developing countries need for their economic development is in the public domain. What this argument does, is merely look at the technology that was used during the take off period in the developed countries. This argument may be rather simplistic, in extrapolating from the type of technology that the developed countries needed during the industrial revolution or thereabouts. The discovery of the steam engine, electricity and atomic energy were major landmarks, but within the context of cumulative and incremental research in the sciences and innovation.

This aspect needs emphasis. Research and innovation to date, can hardly claim to be original in any respect; for it is cumulative and incremental in nature in the sense that at any given time and for any given invention, the existing inventions and knowledge are always heavily drawn upon. Thus a crucial factor in dissemination of technology and promotion of innovation, is access to the state of the art knowledge in order to equally be on the front-line of innovation and inventions. Any system for the protection and innovation of intellectual property rights, that allows the hoarding or restricting access to tools for research (such as patents in the field of genetic engineering), that prevents the use of knowledge at the cutting edge (such as the patents granted to global corporations and some profit-motivated research institutions), only perpetually keeps the current holders of intellectual property rights far ahead of the rest and sentences the rest to perpetual dependence - they will never catch up.

The rise of global corporations are a major factor in restricting the dissemination of technology and restricting innovation. According to the theory of internalisation, multinational enterprises will locate in jurisdictions abroad, in foreign markets, when they can maintain transactions relating to their know-how, within the group of companies, that is among the branches and subsidiaries of the multinational company. If this is not possible, they will not locate abroad, they will produce within the home state and export their products to foreign markets, rather than setting up branches or subsidiaries within the foreign markets. That is, laxed intellectual property laws that would facilitate dissemination of technology and innovation, will keep them away. They will come only if they can succeed to keep their technology and innovation within themselves, and if the technology will not be diffused so as to create competitors and deny them the advantage they otherwise enjoy. According to the Human Development Report 2000, at p.84, global corporations hold about 90 per cent of the world’s patents.

It is in this sense that among the developed countries, the relatively less developed in the field of technology, did adopt deliberate policies of catching up with their developed counter-parts, through replication and reverse engineering. It is not surprising, in this regard, that many developed countries only introduced patent laws in the 1970s or later, after catching up with the others. What spurred the Agreement on TRIPs as we know it, was the successful replication and reverse engineering in the newly industrialising countries, to which developed countries were steadily losing the competition in technology-intensive products and the products of the arts.

Against this background then, developing countries, particularly least developed countries, need to catch up with developed countries, as the medium term objective. The immediate objective is to have access to cutting edge technology, both for purposes of utilisation and of building the requisite socio-economic basis for innovation around the modern inventions. In this regard, training will be a major factor, but this includes the ability on the part of the general population to complement the inventions by innovating around them. In particular, this includes the capacity to tap into the research and development programmes of global corporations that countries may host.

In this view least developed and developing countries need the following types of technology and facilities:

·       Technology and all the know-how that informs the state of the art inventions and innovation; in particular, technology and know-how that constitutes research tools;

·       Massive education programmes in the state of the art technology, in particular experimentation around all existing patents in developed countries, which will require scholarship and comparable funding aimed at generating a critical number of relevant scientists for the least developed and developing countries;

·       In this regard, particular attention needs to be paid to generously staffing and equipping public non-profit research institutes of least developed and developing countries;

·       Agro-processing technology that is designed to increase productivity in the particular category of primary products particular least developed and developing countries may be endowed with;

·       Manufacturing technology that has linkages into the primary sectors of the countries

·       Technology necessary to immediately link least developed and developing countries to the globalisation process in an equitable manner; especially to facilitate access to global markets and to facilitate learning

However, this technology transfer and acquisition by itself, will not be the panacea to the problem of inadequate technology and innovation in the least developed and developing countries. We believe that the transfer and acquisition be complemented with domestic measures and a supportive multilateral regime that impose obligations on holders of intellectual property rights, and on global corporations especially in terms of leaving governments with ample scope to take measures  for public policy and for the attainment of the country’s development goals. Least developed and developing countries should be allowed to replicate and reverse engineer around inventions; and in particular, they must not be required to protect intellectual property rights in technology that constitutes research tools. For this is the lesson of history, it is the path that developed countries followed. This will require amendments to the Agreement on TRIPs, specifically to add these exceptions for least developed countries. Ì

Summary of the WTO Seminar on Technology, Trade and Development

Rosalina Muroyi

The WTO Committee on Trade and Development held a Seminar on Trade, Technology and Development  on 14 February 2001, in Geneva. The objective was to identify opportunities and challenges faced by developing countries in relation to access to technology in the context of the multilateral trading system; to identify policy options and choices, as well as types of support and assistance available to developing countries

Presentations drew from studies on the subject by UNCTAD, WTO;  OECD, UNIDO, UNEP, speakers from  the Indian and Zambian delegations in Geneva, the Southern Methodist University in Texas, .and from the Brazilian Ministry of Science and Technology.

It was recognised that technology is a key driver in the trade and development process. and the following were identified as possible ways of technology transfer: FDIs, copying through a process of reverse engineering, contractual arrangements such as licensing, and purchasing off-the-shelf machinery that embody the particular technology. The OECD study showed how the Asian countries benefited from FDIs. Lessons are however, to be noted, from the Asian crisis: risk of over-investment, risk of growing reliance on foreign capital and risk of structural imbalances. These weaknesses bring about weak competitiveness in terms of technology. The relationship between human capital and FDIs was also analysed. It was depicted that, the level of education is one of the factors considered by firms when they need to invest in a particular country. Human capital, through training or learning by doing, brings about growth. On the other hand, FDIs, through technology transfer, bring about growth. However, spill-over effects may be limited, in part owing to the interest that foreign investors may have in safeguarding their technological assets from potential competitors. Hence, there is no clear cut evidence of positive effects of technological progress on growth and of FDIs on growth.

Some of the policy issues identified in connection with technology transfer and development include: importance of investment in Research and Development, importance of improving innovation system, importance of technology advancement and diffusion of acquired knowledge, role of education policy, setting incentives to attract FDIs. However, FDIs do not always result in technology transfer. Where there is no readily available human capital, multinationals are not interested in investing since it will imply transfer of know-how to the host country. In this case, they will not be able to comply to the host country’s policy  of creating an environment conducive to the diffusion of acquired knowledge. The session was closed by an excellent example of a developing country that has rapidly acquired and developed its technology, Brazil. Advancement here was more national driven that FDI driven. - - Government investment, strong small enterprises and privatisation (telecommunications, banking, research and investment). Brazil is phasing out all paper-work throughout all its industries right  up to government tax claims!

In the session dedicated to ‘Access to technology and Multilateral Rules’, some elaboration was made with regard to the effect of IPRs on technology transfer and patents were given as an example. With patents, payment has to be made to be able to use the technology. In the absence of protection, some technology is prone to be accessed and developed, even against the will of the owner, e.g. computer software - by copying. In cases where secret know-how is only in the hands of the owner, it means that copying will be impossible. Payment and guarantee of protection of diffusion of the know-how will be needed. If this know-how is coming from a foreign company it therefore means that the technology will not be transferred to the host country. So, there will be no interest of the host country to be favourable of such kind of investment.

In this session, a total opposite of the success story of Brazil was shown by the example of the experience of LDCs with regard to technology transfer. It was emphasised that foreign investors find no investment attraction in LDCs and many other developing countries. LDCs see TRIPS/ IPRs as their greatest hope for technology advancement. However, no implementation has been done up to date because of exorbitant financial and administrative costs involved. Naturally, foreign investors will not come where the legalistic part of their interest is not yet in place. Technological development was noted as one of the principal ways of integrating developing countries into the multilateral trading system. They therefore need support to enhance technological transfer. However, technical assistance alone is not a sustainable solution.

In spite of the shortfalls of Agreements like TRIPS, in fulfilling the objective of technology transfer, developing countries were encouraged to flexibility available to them under the Agreement on Trade in Services (GATS). GATS allows developing countries to attach conditions to their market access offers that would facilitate access to technology. However, as in goods sectors, access to technology does not automatically bring about technology transfer. Ì

DIRECTOR’S COMMENT: ADAPTIVE TRANSFER, FULL TRANSFER AND PSEUDO TRANSFER OF TECHNOLOGY

As far as we can make out, three forms of technology transfers or transactions may be identified: Adaptive Transfer (AT) where Foreign Technology (FT) supplied in year one is adapted by a domestic technological and scientific capacity (DTSC) before going into Production (P) in year two or three; Full Transfer (FT), where FT is purchased in year one, is simultaneously used in production and made the subject of domestic Research and Development (R&D) and engineering design, and in the year 'N', the technology is renovated or upgraded so that local/national DTSC is able to deliver the renovated or so-called 'next generation' technology; and Pseudo Transfer (PT), where FT functions only as an  input into production, with no repercussions whatsoever on DTSC.

It is important to make these distinctions because it is not useful, as is usual tendency, to talk about “technology transfer” in general.  As both Francis Mangeni and Rosalina Muroyi show in their articles, most so-called technology transfers to the developing countries, and especially the LDCs, is not genuine transfer, or, in our words, they are merely pseudo-transfers. They are simply excuses for transnational corporations (TNCs) to take over local companies, or to carve out a share of the domestic markets for them.  And this should surprise nobody.  Why should the TNCs bother to transfer technology to LDCs in the above sense of FT when these countries do not have, nor ever likely to have, the necessary DTSC to design-engineer the technology to deliver the next generation technology?  So all this talk about how foreign direct investments will “bring” technology to the LDCs is a lot of, pardon the expression, hogwash.  It will not happen. In this condition, the LDCs may settle for at least adaptive transfers, but then they must know what price they have to pay for these.  In other words, they should be under no illusion that they are creating some kind of a scientific base for themselves.  This is not to say that, just because they are small countries, they cannot have technology of their own.  They can; but, then, they must not count on TNCs to do the job for them.  Like Cuba, they must then select a particular area (like Cuba has done by identifying their knowledge of traditional medicine and pharmacology) in which to develop their own technology base.

As for the bigger developing countries that have, or can in future create, a DTSC, the matter is a bit different. As Muroyi’s article shows, Brazil has been able to develop its own scientific and technology base in some sectors. The obviously proud delegate of Brazil to the Seminar organised by the WTO Committee on Trade and Development is reported to have said:  “Advancement here was more national driven that FDI driven (based on) Government investment, strong small enterprises and privatisation (telecommunications, banking, research and investment). Brazil is phasing out all paper-work throughout all its industries right up to government tax claims!”

Of course, we do not know how independent Brazil is in technology, but what the delegate said made a lot of sense.  You cannot depend on the TNCs, or rely on FDIs, to develop the technology for you.  And this, too, should surprise nobody.  Why should the TNCs create an independent technology base in a developing country for the latter then to compete with the TNC for future markets, especially where the developing country may have historical, geographical, and cultural advantages over the foreign TNCs?  Such developing countries have to bargain with the TNCs to “surrender” their knowledge in return for market access, and then they need to quickly develop a domestic scientific and technical capacity to stand on their own in that particular sector.  They cannot expect TNCs to do the job for them.  Alternatively, they should do their own thing without the help of the TNCs or FDIs.  Big countries such as India and China are doing both.  They are negotiating with TNCs from a position of relative market strength, and they also seek to develop an R&D base of their own. China, especially, is a tough negotiator.  It does not simply give away access to its potentially vast domestic market to a TNC for nothing.  It demands that the TNC carries out a genuine transfer of technology, including engineering designs.  At the same time, China has sent thousands of young people over to America and European universities to acquire a scientific knowledge base with which to develop its own domestic scientific and technical capacity.

These are the only options for the developing countries and the LDCs.  To their national efforts, the developing and least developed countries of the South can add regional efforts to pool resources to try and build regional domestic scientific and technical capacities.  In the SADC region, for example, it would be difficult for a country like Zambia or Mozambique to develop its own scientific and technology base.  But in a regional setting, they can take advantage of the superior domestic scientific and technical capacity of South Africa, or the skills of Mauritius in niche sectors (for example, R & D in the sugar industry).  SADC or COMESA should develop a protocol on the subject that could identify modes of technology transfers between member countries, and they should strategise on the building of a regional domestic scientific and technical capacity without having to depend on foreign TNCs or FDIs.  This is not an impossible dream.  It can be done. Ì

Produced by the International South Group Network (ISGN) Director and Editor: Y. Tandon; Advisor on SEATINI: B. L. Das

Editorial Assistance: Helene Bank, Rosa Muroyi and Raj Patel

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